Shares of consumer conglomerate TheClorox Company(NYSE: CLX) rose on Friday even though the S&P 500 dropped like a rock. The company reported results for its fiscal fourth quarter of 2024 that encouraged investors. As of 10:40 a.m. ET today, Clorox stock was up 5%, whereas the S&P 500 was down a sharp 2.5%.
So Clorox's quarter was good, right?
In the case of Clorox, I wouldn't call its latest quarter an overwhelming success even though its stock price is up nicely. But investors are overlooking lackluster sales because profits are strong.
In the fourth quarter, net sales fell 6% year over year. Granted, it divested its business in Argentina, which brought the number down. But its organic-sales metric takes this into account, and the quarter's organic sales were down 3%.
That said, the company made headway with profitability. During its fiscal 2024, it had a gross margin of 43% compared to a gross margin of about 39% during its fiscal 2023, a huge one-year improvement.
For fiscal 2025, management believes it can keep improving and hit a gross margin of about 44%. And this should help it achieve full-year earnings per share (EPS) of $4.95 to $5.20, which is a solid year-over-year improvement.
Is Clorox stock up too much?
With the jump in price today, Clorox trades at 27 times its forward earnings estimates, assuming it hits the high end of its guidance. That's a tad pricier than your average stock in the S&P 500. Moreover, management doesn't expect top-line growth in the coming year, meaning it should arguably trade at a below-average valuation instead of a high one.
For me, Clorox stock is up too much given its financial results and outlook. That said, the company's products are always in style. Therefore, demand should be steady no matter what the economy does, which does count for something.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
